Asia Economic Institute et al v. Xcentric Ventures LLC et al

Filing 134

NOTICE OF MOTION AND Second MOTION for Sanctions Fed.R.Civ.P. 11 filed by Defendants Edward Magedson, Xcentric Ventures LLC. Motion set for hearing on 10/4/2010 at 01:30 PM before Judge Stephen V. Wilson. (Speth, Maria)

Asia Economic Institute et al v. Xcentric Ventures LLC et al

Doc. 134

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

Maria Crimi Speth, (Admitted Pro Hac Vice) [e-mail] JABURG & WILK, P.C. 3200 North Central Avenue, Suite 2000 Phoenix, Arizona 85012 [phone] David S. Gingras, CSB #218793 [e-mail] Gingras Law Office, PLLC 4072 E Mountain Vista Dr. Phoenix, AZ 85048 Tel.: [phone] Fax: [phone] [e-mail] Attorneys for Defendants Xcentric Ventures, LLC and Edward Magedson

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA ASIA ECONOMIC INSTITUTE, LLC, et al., Plaintiffs, v. XCENTRIC VENTURES, LLC, et al., Defendants. Pursuant to Rule 11(c), Fed.R.Civ.P., Defendants XCENTRIC VENTURES, LLC and EDWARD MAGEDSON (collectively, "Defendants") respectfully request that the Court enter an Order sanctioning Plaintiffs Asia Economic Institute, LLC, Raymond Mobrez, and Iliana Llaneras for their violations of Rule 11(b), Fed.R.Civ.P. Plaintiffs have filed with the Court an Ex Parte Application for Temporary Restraining Order (Document 101)(the "Application") and supporting declarations which (1) have been presented for an improper purpose; (2) contain claims and legal contentions that are not MOTION FOR SANCTIONS
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Case No: 2:10-cv-01360-RSWL-PJW SECOND MOTION FOR SANCTIONS PURSUANT TO FED.R.CIV.P. 11 Hearing Date: Time: Courtroom: October 4, 2010 1:30 p.m. 6

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

warranted by existing law; and (3) contain factual allegations which have no evidentiary support, each of which is a direct violation of Rule 11(b). Defendants have presented this Motion to Plaintiffs and requested that they withdraw the Application entirely or correct each of the deficiencies identified within this Motion. However, twenty-one days have passed and Plaintiffs have elected to not correct these problems. As a result, sanctions are warranted pursuant to Rule 11(c)(2). This motion is made following a 21-day period after service on Plaintiffs, which Defendants believes also complies with L.R. 7-3.

I.

THEORY UNDERLYING RULE 11 "Filing a complaint in federal court is no trifling undertaking. An attorney's

signature on a complaint is tantamount to a warranty that the complaint is well grounded in fact ...." Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir.2002). "[T]he central purpose of Rule 11 is to deter baseless filings in district court and thus, consistent with the Rules Enabling Act's grant of authority, streamline the administration and procedure of the federal courts." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393, 110 S. Ct.

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2447, 2454, 110 L. Ed. 2d 359 (1990) (citing Advisory Committee Note on Rule 11, 28 U.S.C.App., p. 576). "Rule 11 imposes a duty on attorneys to certify that they have conducted a reasonable inquiry and have determined that any papers filed with the court are well grounded in fact, legally tenable, and `not interposed for any improper purpose.'" Id. As the Notes of the Advisory Committee on Rules point out, the language of Rule 11 "stresses the need for some prefiling inquiry into both the facts and the law to satisfy the affirmative duty imposed by the rule. The standard is one of reasonableness under the circumstances.... This standard is more stringent than the original good-faith formula and thus it is expected that a greater range of circumstances will trigger its violation." Fed.R.Civ.P. 11, Notes of Advisory Committee, 28 U.S.C.A. Rules of Civil Procedure (Supp.1988); see Rachel v. Banana Republic, Inc., 831 F.2d 1503, 1508 (9th Cir.1987) MOTION FOR SANCTIONS
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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

(counsel has affirmative duty of investigation into law and fact before filing). Under Rule 11(b), an attorney has a "nondelegable responsibility" to "personally ... validate the truth and legal reasonableness of the papers filed," Pavelic & LeFlore v. Marvel Entm't Group, 493 U.S. 120, 126, 110 S.Ct. 456, 107 L.Ed.2d 438 (1989), and "to conduct a reasonable factual investigation," Christian, 286 F.3d at 1127. To determine whether the inquiry actually conducted was adequate, the court applies a standard of "objective reasonableness under the circumstances." Hudson v. Moore Business Forms, Inc., 836 F.2d 1156, 1159 (9th Cir.1987).

II.

PLAINTIFFS HAVE VIOLATED RULE 11(b)(1) and (2) Rule 11(b)(1) provides that by filing a pleading with the Court, the attorney

certifies that it is not being presented for any improper purpose and that it is warranted by existing law or nonfrivilous argument for extension of the law. Plaintiffs request in the Application that the Court enter a TRO ordering that Defendants "insert the meta tag <meta name-"Robots" content="noindex,nofollow"> into the HTML for the 5 web pages concerning plaintiffs pending the outcome of this litigation" violates this provision of Rule 11. As admitted by Plaintiffs' own expert, (Document 102), a "no index, no follow" code is a code which tells the search engines to not index the website. In other words, it prevents the website from showing up on search engine results. Plaintiffs, therefore, have requested that the Court violate the First Amendment and suppress the postings on Ripoff Report about Plaintiffs so that the public cannot find the postings. This is the equivalent of an order that the postings be removed from the Internet. Plaintiffs have made this request to chill free speech without even an attempt at showing a strong likelihood of success on the merits, irreparable injury, balance of hardships, or that public policy favors the injunction. See generally Earth Island Institute

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

v. U.S. Forest Service, 442 F.3d 1147, 1158 (9th Cir. 2006); Johnson Controls v. Phoenix Controls Systems, 886 F.2d 1173, 1174 (9th Cir. 1989). In addition to the improper purpose of suppressing negative content about Plaintiffs' (without any showing that it is false), Plaintiffs additional improper purpose appears to be to waste Xcentric's money in the hopes that it will give in and remove or edit the posting about Plaintiff regardless of the merits of the claim. Plaintiffs filed an 84 page, more than 300 paragraph Amended Complaint on July 27, 2010, and then, knowing that the Motion to Dismiss that complaint is due by August 6, 2010, filed this Ex Parte application on August 3, 2010. been an issue for months. This is despite the fact that Plaintiff claims that ESI has

III.

PLAINTIFFS HAVE VIOLATED RULE 11(b)(1) Rule 11(b)(3) explains that by filing a pleading with the Court, the attorney

certifies that: to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances...the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery. Fed.R.Civ.P. Rule 11(b)(3). Much like the Amended Complaint, the Application is rife with factual contentions that are wholly lacking in any evidentiary support. Moreover, as to most of these false allegations, Plaintiffs and their counsel had actual knowledge that the allegations they are presenting are false. Even if Plaintiffs only "chose to state as a fact what was at the best a guess and a hope, [they] engaged in misrepresentation." In re Curl, 803 F.2d 1004, 1006 (9th Cir.1986), overruled on other grounds, Partington v. Gedan, 923 F.2d 686 (9th Cir.1991) (en banc).

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

Pg

False Allegation by Plaintiffs

Why Allegation Lacks Evidentiary Support

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That Ripoff Report solicits Every statement regarding rebuttals that Plaintiffs allege is false is rebuttals through false statements. accurate. Plaintiffs know that Ripoff Report allows free rebuttals to be filed because Plaintiffs filed rebuttals. l The Ripoff Report Enterprise makes false statements that induce subjects to submit rebuttals (which acts to their detriment by refreshing the negative, more prominent, Reports for search engines). Plaintiffs are aware that there is no evidence to substantiate the claim that filing a rebuttal increases the relevancy of a report with a search engine. Defendants have previously explained that filing a rebuttal (a) is not tied to an increase in visitor traffic; and (b) cannot "strengthen the overall authority" of the RipOff Report website, because the relevancy of a website is something which is determined by a Google algorithm. Plaintiffs are falsely implying that they required the services of an employee to perform SEO services for them and that there was a causal relationship between that and any statements made by Xcentric. They are also falsely asserting that they needed to advertise to obtain such an individual. As set forth in detail in the Motion to Dismiss, there is no causal relationship between these alleged damages and the alleged conduct.

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Plaintiffs have been damaged "including loss of property interests in Plaintiffs' formerly robust business in brokering real estate transactions, payments to reputation repair consultants, and otherwise."

Defendants it appears have deleted There has never been a category "suspicious activities." an entire category of Ripoff called Plaintiffs failed to investigate this Reports baseless allegation and if they had done so, they would have confirmed that no such category every existed. Plaintiffs have demonstrated a familiarity with webarchive.org which they could have used to investigate this allegation before making it.

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

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Defendants have indicated that they Defendants have made no such have and will continue to permit statement overwriting of ESI by their SQL servers; the requested ESI preservation As set forth above, a "do not follow" code clearly would not preserve measures are to status quo. preserve the status quo This is a blatant misrepresentation of the conversation. It should be noted that undersigned requested permission to record this conversation and Ms. Borodkin refused to consent.

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4 At the April 27, 2010 discovery (Borodkin Declaration) plan conference, the parties discussed ESI and electronic evidence preservation... Ms. Speth insisted there was no way to preserve this type of information...

5 Defendants' counsel, on May 10, This is a misstatement of the May (Borodkin 10, 2010 communication. Declaration) 2010, admitted that Defendants do not preserve all ESI and feigned ignorance as to what ESI needed to be preserved: Each of the above statements are false and unsupported by any evidence, either existing or having potential to exist. The Ninth Circuit has explained why misrepresentation by attorneys to a court cannot be taken lightly: The vice of misrepresentation is not that it is likely to succeed but that it imposes an extra burden on the court. The burden of ascertaining the true state of the record would be intolerable if misrepresentation was common. The court relies on the lawyers before it to state clearly, candidly, and accurately the record as it in fact exists. In re Girardi, --- F.3d ----, 2010 WL 2735731 (9th Cir. 2010) (internal quotation omitted). The complete absence of evidence to support the allegations identified above suggests that Plaintiffs, at best, failed to conduct a reasonable inquiry, and, at worst, made deliberate misrepresentations to this Court. See Mezzetti v. State Farm Mut. Auto. Ins. Co., 346 F.Supp.2d 1058, 1067 (N.D.Cal.2004) (noting that "[g]obbledygook can be no less obfuscatory than an outright lie"). Each of Plaintiffs' statements identified in the chart

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

above demonstrates that the factual contentions they have made lack evidentiary support or even the potential to discover such evidentiary support, in violation of Rule 11(b)(3).

IV.

SANCTIONS ARE WARRANTED "An attorney who signs the paper without such a substantiated belief `shall' be

penalized by `an appropriate sanction.'" Hartmax, 496 U.S. at 393 (emphasis added). The Court in Hartmax succinctly explained why Plaintiffs and their counsel must be sanctioned: "Baseless filing puts the machinery of justice in motion, burdening courts and individuals alike with needless expense and delay." Id. at 398. As established herein, Plaintiffs are in violation of three separate sections of Rule 11. Because each violation subjects Plaintiffs ­ and their counsel ­ to sanctions, Defendants request that the Court order Plaintiffs to pay all of Defendants' attorney fees incurred in defending this frivolous lawsuit and such other relief as the Court deems appropriate.

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V.

CONCLUSION For all of the foregoing reasons, Defendants request that the Court order Plaintiffs

and their counsel to pay all of Defendants' attorney fees incurred in defending this frivolous lawsuit and such other relief as the Court deems appropriate. DATED this 3rd day of September, 2010. JABURG & WILK, P.C.

/s/Maria Crimi Speth Maria Crimi Speth Attorneys for Defendants

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JABURG & WILK, P.C. ATTORNEYS AT LAW 3200 NORTH CENTRAL AVENUE SUITE 2000 PHOENIX, ARIZONA 85012

CERTIFICATE OF SERVICE I hereby certify that on the 3rd day of September, 2010, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing, and for transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Ms. Lisa Borodkin, Esq. Mr. Daniel F. Blackert, Esq. Asia Economic Institute 11766 Wilshire Blvd., Suite 260 Los Angeles, CA 90025 Attorneys for Plaintiffs [e-mail] [e-mail] And a courtesy copy of the foregoing delivered to: Honorable Stephen V. Wilson U.S. District Court Judge /s/Debra Gower

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